Friday, June 01, 2012

Today's Employment Report

Today's employment report paints a somewhat bleak and mixed picture of current U.S. labor market conditions, with an increase of only 69,000 payroll jobs in May (less than half of the 150,000 consensus expectation) and an increase in the May jobless rate to 8.2%. While most reactions to the job data could be best described as "disappointment," here are a few bright spots in today's report:

1. Manufacturing payrolls increased in May by 12,000, which was the eighth consecutive monthly gain in factory jobs, and the 18th monthly increase out of the last 19 months. For the 11th straight month, the manufacturing jobless rate (7.1%) was below the national rate (7.7% NSA). Manufacturing employment at just below 12 million in May was at the highest level in slightly more than three years, since April 2009. Since 2010, manufacturing employment has increased by almost 500,000 jobs.

2. The more comprehensive measure of employed workers from the May household survey (includes self-employed workers) increased by 422,000 jobs last month, and has shown an increase of almost 1.5 million jobs this year, vs. the 823,000 increase in payroll employment from January to May. Total civilian employment in May of 142.3 million was the highest since December 2008, more than three years ago.

3. Temporary help employment for professional and business services increased in May to almost 2.5 million jobs, reaching the highest employment level for those workers in more than four years going back to February 2008. With continued growth in temporary employment this summer, the number of temporary jobs in the U.S. economy should exceed pre-recession levels sometime this summer.

4. The jobless rate for college graduates fell to 3.9% in May, the lowest unemployment rate for that group since December 2008, almost three and-a-half years ago.

"So I think the market's reaction to today's news has been excessively
pessimistic. I don't see convincing signs of deterioration in the
outlook; I see an economy that continues to grow at a sub-par pace, and
that's been the case for the most of the past three years."

48 Comments:

Employment through this expansion has been growing at a faster pace than the previous two (1991-2001, 2002-2008)

The annual employment trend is rising at the fastest pace in over four years (aka, the economy is adding jobs at the fastest pace in 4.5 years), and will likely accelerate in the short run (over the next few months).

Historically, May is a month where fewer jobs are added. There's not much to indicate an imminent reversal in the slow but steady recovery in the jobs market in this report.

The 80's Growth (5/1/1983-12/1/1990): Gained 6.2% when 21 months into the recovery.

The difference is we have a lot father to come from. Really, this recovery in employment is not historically unusual. Sure, it could be faster, but it's not dead by historical standards (the median growth rate for employment at this point in a recovery is 1.6%).

trying to characterize this as rapid employment growth seems like a real stretch.

Woah woah woah...I never used the word "rapid." I said it is growing faster than the last two expansions. But I also said this recovery has been slow and steady.

From a growth rate perspective, this recovery is hardly unusual. We'd like it to be faster and it really should be if it weren't for some dubious economic policies over the past 7-10 years. But to say we are having no growth, or historically unusual isn't correct either.

The topline unemployment rate, which briefly was at 8.1% in April, ticked back up to 8.2%.

More worrisome than the slow growth in employment is the way corporate profits are screaming higher despite it. I'm not against corporate profits! - it's just that we cannot or need not look to them to hire - it appears they don't need to.

Apology accepted. I can certainly see how what I said could be interpreted as "rapid."

Morganovich-

I think we may be discussing two separate things.

Let me start by agreeing with your example.

Your point, as I understand it, is that this recovery has been slower returning to pre-recession levels than past recessions. I can agree with that. If I have misunderstood your point, please correct me.

My point is that the growth rate is not that unusual for this point in the recovery. We don't want to read too much into the headline number. If May is a typical period of employment decline/slower growth, then the number should not surprise us. Rather, I'd be more worried had it spiked (or gone negative).

I am just worried about folks seeing this number and reading it as weakness in the economy. It is not signalling that. We are not seeing a trend in employment to suggest the US economy isn't improving. That's my main point here.

The first three months of the year had amazing job creation numbers. All sectors of the economy, and especially construction, benefited from a mild winter. I wonder if what we saw was Spring/early Summer hiring numbers get pulled towards the first quarter and what we are seeing now is not indicative of slower hiring, but rather seasonal hiring have already been done. That could account for the Construction numbers, anyway.

"My point is that the growth rate is not that unusual for this point in the recovery"

i do not think that is accurate.

first off, "this point in a recovery" does not exist in other recessions.

jobs have recovered and gone into expansion by now in the others. the fact that we are still in recovery at all is unique since ww2.

second, this growth does not look "typical" to me.

2.4% in 20 months now vs 3.1% in the 90's means the 90's were 29% faster.

that's a big differential. =/-30% seems like an awfully broad range for "typical".

the recovery from the 1982 recession was a blistering 7.05% in the following 20 months. again, calling this "typical in comparison to that which was nearly triple this rate seems like a bit of a stretch.

i'm having trouble seeing what metric you are using to see this as typical.

using a yoy number seems to hide more than it reveals. in the other recessions we were much further along first.

no question that the rest of this year and june in particular are nightmares from a finincial and business planning standpoint.

in june we have the scotus ruling on obamacare and the greek elections and the spanish bank recap plan and greece running out of money if no new cash is forthcoming.

then we have the us election, huge tax hikes coming through if nothing is done, a nasty budget fight, and an epa gone wild.

it's not difficult to see why markets are so skittish and why businesses have no idea what to do just now.

this is not dissimilar to what happened in the 30's. i would recommend amity schlae's excellent book "the forgotten man" on this. one of the things that blocked recovery in the 30's was massive uncertainty created by intrusive federal programs and interventionist government. when there are elephants stumbling around the room, it's not the time to build things.

first off, "this point in a recovery" does not exist in other recessions.

What I meant to say was: when the expansion had been going on for XX months, in this case 21. When it had been 21 months since the jobs trend hit the bottom.

jobs have recovered and gone into expansion by now in the others. the fact that we are still in recovery at all is unique since ww2.

Jobs-wise, this recession was unique since WWII. We shed a ton of jobs.

As for the question of metrics, I am looking at the annual data: a 12 month moving average. From the point where the annual data hit a bottom to the point we are at now. In other words, comparing August 2010's 12 month moving average to May 2012's 12 month moving average.

i think there is some cargo cult thinking going on with our politicians.

they heard that you never get reelected with u3 over 8% so they decided to reduce the number by gaming it in hopes of reelection, but, as the public knows if they are employed or not, i suspect their personal experiences will trump published numbers at the ballot box.

1. Manufacturing payrolls increased in May by 12,000, which was the eighth consecutive monthly gain in factory jobs, and the 18th monthly increase out of the last 19 months. For the 11th straight month, the manufacturing jobless rate (7.1%) was below the national rate (7.7% NSA). Manufacturing employment at just below 12 million in May was at the highest level in slightly more than three years, since April 2009. Since 2010, manufacturing employment has increased by almost 500,000 jobs.

Talk about missing the boat. There are three things to consider when harping on manufacturing jobs.

First is the depth of the contraction. It is natural to have a bounce after a severe contraction that postponed needed purchases.

Second is the automobile sector. Factories have kept assembling vehicles even though inventories have been building. The problem is that real incomes are down and that much of the activity can no longer be sustained. Expect to hear announcements about consolidation and factory shutdowns next year.

Third is the shale energy scam. There are huge expenditures as companies hope to cash in on shale gas and oil. These require massive amounts of pipe, new rigs, compressors, pumps, etc. But we have already seen the shale gas bubble implode and from what I see the shale liquids bubble does not have nearly as much time to run.

The difference is we have a lot father to come from. Really, this recovery in employment is not historically unusual. Sure, it could be faster, but it's not dead by historical standards (the median growth rate for employment at this point in a recovery is 1.6%).

But that is the point. Given the amount of liquidity thrown into the system it is very unusual to have this little growth. It should be easy to create jobs when trillions in new money and credit are created. The fact that it did not work should make you rethink what you believe that you know.

All BLS jobs reports are junk. They are based on surveys and must be repeatedly revised. They use a stone age methodology.

Instead, we should be using Treasury figures, from the immediate, daily, online payroll reports of all employers - the count of employees, payroll amounts, and withholding amounts. This is not a sample, it is the jobs universe.

TrimTabs Economic Research tracks Treasury figures and reports them each month. Here's a video on the May figures - 124,000 jobs created.

Instead, we should be using Treasury figures, from the immediate, daily, online payroll reports of all employers - the count of employees, payroll amounts, and withholding amounts. This is not a sample, it is the jobs universe.

The problem is that the government does not like the Trimtabs data because in most cases the numbers come out far worse than the reported numbers. And the Trimtabs people have argued that the BLS bogus inflation numbers look the real wage numbers much better than they are.

" There are limited options for additional action. The Fed generally guides the economy by adjusting short-term interest rates, but it has held rates near zero since December 2008, and already has said that it plans to keep rates near zero until late 2014, at the earliest. Even an extension of that promise would have little impact on interest rates.

That leaves bond purchases, the Fed’s major tool during the current crisis. In 2009 and 2010, the Fed bought more than $2 trillion of Treasury and mortgage-backed securities, forcing private money into investments that carried higher risks and driving down borrowing costs for businesses and consumers."

" There are limited options for additional action. The Fed generally guides the economy by adjusting short-term interest rates, but it has held rates near zero since December 2008, and already has said that it plans to keep rates near zero until late 2014, at the earliest. Even an extension of that promise would have little impact on interest rates.

That leaves bond purchases, the Fed’s major tool during the current crisis. In 2009 and 2010, the Fed bought more than $2 trillion of Treasury and mortgage-backed securities, forcing private money into investments that carried higher risks and driving down borrowing costs for businesses and consumers."

Actually, the Fed is not bound by any rules and, as Greenspan has stated, could buy whatever it wished. Perhaps it can start by buying some shares of Facebook, Chesapeake, and GM. It could buy the bonds of shale producers or solar companies looking for cash to keep going. It could buy copper, zinc, or office buildings. Anything to get people like Mark to tell us how great things are, at least until after the election is over.